Anglogold Ashanti has indicated that headline earnings for 2021 is expected to be between US$572 million and US$642 million, with earnings per share of $1.37 to $1.53.
This reflects a decline between the range of 36% and 42% year-on-year compared with $2.28 in 2020. The earnings per share figure was up to 14% below consensus expectations of $1.59.
Based on requirements of Johannesburg-listed companies over reporting annual earnings, companies are expected to pre-report if they believe financial results will differ by more than 20% from the previous reporting period. As a result, AngloGold Ashanti is expected to release full year results on February 22, 2021.
AngloGold has endured a somewhat difficult year, with its Obuasi mine in Ghana staying offline since May 2021 coupled with high operating costs eating into profits.
AngloGold expects production for 2021 to come in at 2.47 million ounces of gold, putting it at the lower end of the revised guidance range of 2.45Moz-2.6Moz issued in August 2021 but down 18.9% year-on-year- a drop driven by the sale of the company’s South African operations, lower grades, the Obuasi outage and “the continued impact of the COVID-19 pandemic on production and costs”.
The company received another blow in late October, 2021 when the Colombian regulator archived AngloGold’s environmental license application for its Quebradona copper-gold project, a decision the company has since appealed.
Rising Costs Impact Company’s Operations
Meanwhile, production for 2021 was lower than the prior year mainly due to the sale of the South African operations. The Company undertook significant reinvestments across key assets, lower realised grades across certain operations, temporary suspension of underground mining activities at Obuasi, as well as the continued impact of the COVID-19 pandemic on production and costs.
According to the company’s update, COVID-19 impacts were excluded from the revised guidance issued on August 6, 2021. The impact on production from COVID-19 in 2021 was estimated at 47koz for 2021, mainly affecting our operations in Ghana, Brazil and Argentina.
Retrenchments costs incurred was about $18 million or US4 cents per share, following the implementation of the new Operating Model with the view of streamlining the organisation and making it more efficient.
The Company accelerated bond settlement costs of $24 million or US 6 cents per share as a result of the early redemption of the $750 million, 5.125% rate with maturity date of 2022.
These bonds were replaced with the $750 million, 3.375% rate with maturity date of 2028. This therefore, resulted in an extension of the debt maturities of the Company at lower interest rates as part of the continued strategy to optimise the capital structure.
AngloGold recorded higher operating costs resulting in an increase in the cost of sales mainly due to lower grades achieved and higher level of stockpile drawdowns– exacerbated by inflationary pressures and the continued impact of the COVID-19 pandemic on costs.
“Unfavourable foreign exchange movements of $43 million or US 10 cents per share and increased exploration and evaluation costs of $40 million or US 10 cents per share” also impacted the company’s performance.
The Company recorded lower income from joint ventures mainly due to the one-off profit of $19 million or US 5 cents per share achieved through the disposal of the Mali operations in 2020.
The company indicated that the negative impacts from these one-off expenses in the course of the year were partly offset by lower amortization due to lower production volumes; a decrease in net finance costs, including unwinding charges, of $92 million or 22 cents per share.
Contributing to a lower impact from these expenses incurred was lower taxes charged in most jurisdictions due to lower production levels together with non-recognition of deferred taxes relating to the South African region in 2020.
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